March 20 (Bloomberg) -- A Gulf investment group that bought three-time English soccer champion Leeds United in December wants to sell the team by the end of the year, according to the company’s year-end accounts.
Bahraini bank Gulf Finance House EC said its Dubai-based subsidiary GFH Capital paid $33 million for the Yorkshire-based team, and says it is worth $10 million more than that. GFH said it made a “bargain purchase” because of “pressure on the sellers to exit their holdings due to change in their business plan.”
Leeds had success a decade ago, qualifying for Europe’s elite Champions League and producing international players including Jonathan Woodgate, Harry Kewell and Alan Smith from its academy. The team stumbled into financial troubles by spending too much on players, and slipped out of England’s Premier League in 2004. Leeds, after falling into the third division and entering bankruptcy protection, now plays in the second-tier Championship.
“The group has an active plan to sell its stake in LUFC Holdings Limited, and accordingly, the asset and liabilities acquired were classified as held-for-sale and presented in the consolidated statement of financial position,” GFH said in its statement for the year ending Dec. 31. “Subsequent to the year end, the group has commenced negotiations relating to the sale of its stake.”
Later today GFH Capital released a statement on Leeds’s website, saying it was looking “for investment in part of its share, not its entirety.” Club spokesman Paul Dews declined to say why the parent company and its subsidiary had differing positions. GFH Capital said it had invested 10 million pounds into Leeds, according to the website statement.
In November, GFH Capital Deputy Chief Executive Officer David Haigh said the new owners were looking to the “future and start the exciting journey to take Leeds United F.C. back into prime position in English football.”
Speculation about the future ownership of Leeds, which won its last English championship in the 1991-92 season, has grown since February when GFH said it was looking for minority investors to reduce its exposure. The company’s chief investor Salem Patel declined to comment today when asked about the sale.
“These guys came in on the premise they were going to build the club,” said Stephen Schechter, founder of London-based investment bank Schechter & Co Ltd, which raised 60 million pounds ($91 million) of debt for Leeds when it was in the Premier League. “But they don’t care about it. This is short termism: You buy it, you flip it.”
Leeds was taken out of bankruptcy by former Chelsea owner Ken Bates. He owned 73 percent of the team before selling to GFH.
Leeds has a large fanbase and is the only team in the city, Schechter said, putting the team in a good position to return to the Premier League and stay up.
“It’s a great team with a dyed-in-the wool supporter base,” he said in a telephone interview. “It just requires someone who cares for the team, not bottom feeders.”
Schechter helped raise funding for an expansion of Leeds’s Elland Road stadium, with the increased capacity and better facilities expecting to be used to increase ticket sales. The money was instead spent on buying players, and when the team failed to qualify for the Champions League in the 2001-02 season, it was unable to pay its debts.
Leeds’s plight raises questions about standards required of owners in English soccer, Schechter said.
“This is one of the failures of the governance in English football,” he said. “They don’t put their foot down on buyers to make real commitment over the medium and long term. They must demand a minimum commitment of three years.
Malcolm Clarke, chairman of the Football Supporters Federation, which represents soccer fans in England and Wales, criticized GFH’s motives in buying Leeds. ‘‘That is a classic example of all of the reservations that supporters have about football clubs being regarded as a business like any other when what we are talking about here are teams that are part of fabric and lifeblood of local community,” Clarke said in a telephone interview. “Leeds is one of our great iconic clubs with a proud tradition that’s suffered more than most clubs from the behavior of some of the people that have managed it.”
Leeds is 10th in the Championship, seven points away from a place in the playoff positions, which would earn the team the right to play for a spot in the Premier League.
In May, the GFH investment bank, which specializes in Islamic finance, obtained permission from creditors to restructure a $110 million debt. Its accounts showed profits of $10 million in 2012 on sales of $63.6 million.
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